State Tax Codes As Poverty Fighting Tools

2013 Update on Four Key Anti-Poverty Tax Policies in All 50 States 

New Census Bureau data released this month show that the share of Americans living in poverty remains high, despite other signs of economic recovery. The tax systems of virtually every state are making this problem worse rather than better. But state tax systems also have the potential to play a role in fighting poverty. The four low-income tax credits discussed in this report are among the most affordable and effective anti-poverty strategies available to lawmakers: the Earned Income Tax Credit, property tax circuit breakers, targeted low-income tax credits, and child-related tax credits. This report presents a comprehensive view of state anti-poverty tax policies, surveys tax policy decisions made in the states in 2013, and offers recommendations tailored to policymakers in each state as they work to combat poverty.

 

States Praised as “Low Tax” are often high tax states for families living in poverty

Annual state and local finance data from the Census Bureau are often used to rank states as “low” or “high” tax states based on taxes collected as a share of state personal income. But focusing on a state’s overall tax revenues overlooks the fact that taxpayers experience tax systems very differently.  In particular, the poorest 20 percent of taxpayers pay a greater share of their income in state and local taxes than any other income group in all but 10 states (including DC).  And, in every state, low- income taxpayers pay more as a share of income than the wealthiest top 1 percent of taxpayers. Arizona, Florida, South Dakota, Tennessee, Texas, and Washington are six states touted as “low tax” that have especially high taxes on poor residents.  To learn more about how low tax states overall can be high tax states for families living in poverty, read the state briefs below.